Retail Value Inc. (NYSE: RVI) today announced operating results
for the quarter ended September 30, 2019.
Results for the Quarter
- Third quarter net income attributable to common shareholders
was $72.3 million, or $3.79 per diluted share as compared to net
income of $6.0 million, or $0.32 per share, in the year ago-period.
The year-over-year increase in net income is primarily attributable
to the hurricane insurance settlement.
- Third quarter operating funds from operations attributable to
common shareholders (“Operating FFO” or “OFFO”) was $23.1 million,
or $1.21 per diluted share, compared to $25.2 million, or $1.37 per
diluted share, in the year ago-period. The year-over-year decrease
in OFFO is primarily attributable to the impact of asset
sales.
- Sold two shopping centers for an aggregate sales price of $54.6
million.
- Settled insurance claim from damage incurred on the 12 Puerto
Rico assets from Hurricane Maria; received an incremental $70.5
million related to the property insurance claims and $7.0 million
related to the business interruption claim of which $5.7 million
was recorded as income. Including these final payments, SITE
Centers and RVI received total insurance payments amounting to
$185.8 million. Management expects to use proceeds from the
settlement to complete all necessary remaining hurricane-related
repairs.
- Payment of $17.0 million of the $34 million payable to SITE
Centers Corp.
- The Continental U.S. leased rate was 91.4% as compared to 92.2%
at June 30, 2019 due to lease expirations and tenant
bankruptcies.
- The Puerto Rico leased rate was 83.8% as compared to 84.6% at
June 30, 2019 due to lease terminations and tenant
bankruptcies.
Key Quarterly Operating Results
The following metrics are as of September 30, 2019:
Continental U.S.
Puerto Rico
Shopping Center Count
17
12
Gross Leasable Area (thousands)
7,202
4,431
Base Rent PSF
$13.63
$19.94
Leased Rate
91.4%
83.8%
Commenced Rate
91.2%
82.3%
NOI (millions)
$19.8
$21.6
About RVI
RVI is an independent publicly traded company trading under the
ticker symbol “RVI” on the New York Stock Exchange. RVI holds
assets in the continental U.S. and Puerto Rico and is managed by
one or more subsidiaries of SITE Centers Corp. RVI focuses on
realizing value in its business through operations and sales of its
assets. Additional information about RVI is available at
www.retailvalueinc.com.
Non-GAAP Measures
Funds from Operations (“FFO”) is a supplemental non-GAAP
financial measure used as a standard in the real estate industry
and is a widely accepted measure of real estate investment trust
(“REIT”) performance. Management believes that both FFO and
Operating FFO provide additional indicators of the financial
performance of a REIT. The Company also believes that FFO and
Operating FFO more appropriately measure the core operations of the
Company and provide benchmarks to its peer group.
In December 2018, the National Association of Real Estate
Investment Trusts (“NAREIT”) issued NAREIT Funds From Operations
White Paper - 2018 Restatement (“the 2018 FFO White Paper”). The
purpose of the 2018 FFO White Paper was not to change the
fundamental definition of FFO but to clarify existing guidance and
to consolidate into a single document, alerts and policy bulletins
issued by NAREIT since the last FFO white paper was issued in 2002.
The 2018 FFO White Paper was effective starting with first quarter
2019 reporting. The Company did not report any changes in the
calculation of FFO in 2019 related to the clarification in the 2018
FFO White Paper.
FFO is generally defined and calculated by the Company as net
income (loss) (computed in accordance with GAAP) adjusted to
exclude (i) gains and losses from disposition of real estate
property and related investments, which are presented net of taxes,
if any, (ii) impairment charges on real estate property and related
investments and (iii) certain non-cash items. These non-cash items
principally include real property depreciation and amortization of
intangibles. The Company’s calculation of FFO is consistent with
the definition of FFO provided by NAREIT. The Company calculates
Operating FFO by excluding certain non-operating charges and
income. Operating FFO is useful to investors as the Company removes
non-comparable charges and income to analyze the results of its
operations and assess performance of the core operating real estate
portfolio. Other real estate companies may calculate FFO and
Operating FFO in a different manner.
The Company also uses net operating income (“NOI”), a non-GAAP
financial measure, as a supplemental performance measure. NOI is
calculated as property revenues less property-related expenses. The
Company believes NOI provides useful information to investors
regarding the Company’s financial condition and results of
operations because it reflects only those income and expense items
that are incurred at the property level and, when compared across
periods, reflects the impact on operations from trends in occupancy
rates, rental rates, operating costs and acquisition and
disposition activity on an unleveraged basis.
FFO, Operating FFO and NOI do not represent cash generated from
operating activities in accordance with GAAP, are not necessarily
indicative of cash available to fund cash needs and should not be
considered as alternatives to net income computed in accordance
with GAAP as indicators of the Company’s operating performance or
as alternatives to cash flow as a measure of liquidity.
Reconciliations of these non-GAAP measures to their most directly
comparable GAAP measures are included in this release and the
accompanying financial supplement.
Safe Harbor
RVI considers portions of the information in this press release
to be forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, both as amended, with respect to the
Company's expectation for future periods. Although the Company
believes that the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. For this purpose,
any statements contained herein that are not historical fact may be
deemed to be forward-looking statements. There are a number of
important factors that could cause our results to differ materially
from those indicated by such forward-looking statements, including,
among other factors, the ability to execute our strategy as an
independent, publicly traded company. Other risks and uncertainties
that could cause our results to differ materially from those
indicated by such forward-looking statements include our ability to
sell assets on commercially reasonable terms; our ability to
complete dispositions of assets under contract; the success of our
asset sale strategy; property damage, expenses related thereto and
other business and economic consequences (including the potential
loss of rental revenues) resulting from extreme weather conditions
in locations where we own properties, and the ability to estimate
accurately the amounts thereof; sufficiency and timing of any
insurance recovery payments related to damages from extreme weather
conditions; local conditions such as supply of space or a reduction
in demand for real estate in the area; competition from other
available space; dependence on rental income from real property;
the loss of, significant downsizing of or bankruptcy of a major
tenant and the impact of any such event on rental income from other
tenants at our properties; our ability to secure equity or debt
financing on commercially acceptable terms or at all; our ability
to enter into definitive agreements with regard to our financing
arrangements and our ability to satisfy conditions to the
completion of these arrangements; unforeseen changes to the Puerto
Rican economy and government; the ability to secure and maintain
management services provided to us, including pursuant to our
external management agreement with one or more subsidiaries of SITE
Centers; and our ability to maintain our REIT status. For
additional factors that could cause the results of the Company to
differ materially from those indicated in the forward-looking
statements, please refer to the Company’s most recent reports on
Form 10-K and Form 10-Q. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof.
Retail Value Inc.
Income Statement
in thousands, except per share
3Q19
3Q19
Total
Total
Continental U.S.
Puerto Rico
3Q19
9M19
Revenues (1):
Rental income (2)
$29,816
$24,475
$54,291
$174,736
Other property revenues
41
853
894
945
Business interruption income
0
5,675
5,675
7,675
29,857
31,003
60,860
183,356
Expenses:
Operating and maintenance (3)
4,456
8,038
12,495
39,393
Real estate taxes
5,571
1,329
6,900
21,579
10,027
9,367
19,395
60,972
Net operating income (4)
19,830
21,636
41,465
122,384
Other income (expense):
Asset management fees
(2,428)
(8,068)
Interest expense
(9,381)
(34,201)
Depreciation and amortization
(17,676)
(55,409)
General and administrative
(1,111)
(3,054)
Impairment charges
(19,790)
(32,990)
Hurricane property insurance income,
net
72,602
76,233
Debt extinguishment costs, net
(1,949)
(19,358)
Transaction costs
(19)
(37)
Other expense, net
0
(850)
Gain on disposition of real estate, net
(5)
10,483
41,648
Income before other items
72,196
86,298
Tax expense
72
(423)
Net income
$72,268
$85,875
Weighted average shares – Basic &
Diluted – EPS
19,052
18,993
Earnings per common share – Basic &
Diluted
$3.79
$4.52
Revenue items:
(1)
Lost revenue related to hurricane
$0
($169)
($169)
($2,946)
(2)
Minimum rents
20,423
13,876
34,299
110,978
Ground lease minimum rents
1,379
1,791
3,170
10,313
Percentage and overage rent
234
191
425
2,942
Recoveries
7,854
5,715
13,569
42,650
Lease termination fees
33
830
863
940
Ancillary and other rental income
268
1,928
2,196
6,871
Bad debt
(375)
144
(231)
42
(3)
Operating expenses:
Property management fees
(1,227)
(1,449)
(2,676)
(8,671)
(4)
NOI from assets sold
(90)
8,522
(5)
SITE Centers disposition fees
546
3,160
Retail Value Inc.
Reconciliation: Net Income
to FFO and Operating FFO and Other Financial Information
in thousands, except per share
3Q19
9M19
Net income attributable to Common
Shareholders
$72,268
$85,875
Depreciation and amortization of real
estate
17,650
55,331
Impairment of real estate
19,790
32,990
Gain on disposition of real estate,
net
(10,483)
(41,648)
FFO attributable to Common
Shareholders
$99,225
$132,548
Hurricane activity, net (1)
(78,108)
(80,962)
Debt extinguishment, transaction, other,
net
1,968
20,245
Total non-operating items, net
(76,140)
(60,717)
Operating FFO attributable to Common
Shareholders
$23,085
$71,831
Weighted average shares and units –
Basic & Diluted – FFO & OFFO
19,052
18,993
FFO per share – Basic &
Diluted
$5.20
$6.98
Operating FFO per share – Basic &
Diluted
$1.21
$3.78
Common stock dividends declared, per
share
N/A
N/A
Certain non-cash items:
Straight-line rent
(665)
(1,114)
Straight-line fixed CAM
145
446
Loan cost amortization
(1,097)
(3,694)
Non-real estate depreciation expense
(26)
(78)
Capital expenditures:
Maintenance capital expenditures
414
721
Tenant allowances and landlord work
2,850
7,969
Leasing commissions - SITE Centers
366
1,811
Leasing commissions - external
290
671
Hurricane restorations
11,709
52,152
(1)
Hurricane activity, net:
Lost tenant revenue
169
2,946
Hurricane property insurance income,
net
(72,602)
(76,233)
Business interruption income
(5,675)
(7,675)
(78,108)
(80,962)
Retail Value Inc.
Balance Sheet
$ in thousands
At Period End
3Q19
4Q18
Assets:
Land
$539,069
$622,827
Buildings
1,407,000
1,629,862
Fixtures and tenant improvements
152,496
172,679
2,098,565
2,425,368
Depreciation
(662,728)
(704,401)
1,435,837
1,720,967
Construction in progress and land
26,961
26,070
Real estate, net
1,462,798
1,747,037
Cash
71,322
44,565
Restricted cash (1)
99,152
66,634
Receivables and straight-line (2)
24,247
31,426
Property insurance receivable
0
29,422
Intangible assets, net (3)
20,841
31,882
Other assets, net
7,702
11,678
Total Assets
1,686,062
1,962,644
Liabilities and Equity:
Secured debt
654,723
967,569
Payable to SITE
16,668
33,985
Dividends payable
0
24,005
Other liabilities (4)
58,437
84,832
Total Liabilities
729,828
1,110,391
Redeemable preferred equity
190,000
190,000
Common shares
1,905
1,846
Paid-in capital
692,966
675,566
Distributions in excess of net income
71,378
(15,153)
Common shares in treasury at cost
(15)
(6)
Total Equity
766,234
662,253
Total Liabilities and Equity
$1,686,062
$1,962,644
(1)
Asset sale proceeds
0
26,969
Other escrows
99,152
39,665
(2)
Straight-line rents receivable
15,879
18,757
(3)
Operating lease right of use assets
(related to adoption of Topic 842)
1,763
0
(4)
Operating lease liabilities (related to
adoption of Topic 842)
2,890
0
Below-market leases, net
20,465
33,914
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191105005885/en/
Matthew Ostrower, EVP and Chief Financial Officer
216-755-5500
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